Overview
Title
Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Establish Fees for Industry Members Related to Reasonably Budgeted CAT Costs of the National Market System Plan Governing the Consolidated Audit Trail for 2025
Agencies
ELI5 AI
The SEC says that a group called BOX Exchange wants to change how much it charges to keep track of people's trades, making it cheaper than last year. They want everyone's thoughts on this new plan by the end of January 2025.
Summary AI
The Securities and Exchange Commission (SEC) announced that the BOX Exchange LLC has filed a proposal to amend its Fee Schedule for the upcoming year, 2025. The proposed changes involve establishing a new fee system called CAT Fee 2025-1, which sets the fee at $0.000022 per executed equivalent share. This fee helps cover the costs associated with the Consolidated Audit Trail (CAT), a system that tracks trading activity in the national market. The CAT Fee 2025-1 is intended to replace the previous CAT Fee 2024-1, which had a higher rate, and will be in effect for six months to cover half of the budgeted CAT costs. Interested parties are invited to submit comments on these changes by January 29, 2025.
Keywords AI
Sources
AnalysisAI
The document in question is a notice from the Securities and Exchange Commission (SEC) that explains a proposed change by BOX Exchange LLC to alter its fee structure for the year 2025. The change introduces a new fee, known as CAT Fee 2025-1, which is set at $0.000022 per executed equivalent share. This fee is designed to cover the costs associated with the Consolidated Audit Trail (CAT), a crucial system for tracking trading activities in the national market. The new fee replaces a previous fee that was slightly higher, indicative of a reduction. Comments on this proposal are invited until January 29, 2025.
Significant Issues or Concerns
One issue with the document is the lack of clarity regarding why the new fee rate is set at $0.000022. The document does not provide a detailed breakdown of the "reasonably budgeted CAT costs," leaving questions about what specific expenses are included under this umbrella. Furthermore, there is no information on how the fee reduction from the 2024 rate to the 2025 rate will impact the overall budget and whether the fees collected will adequately cover anticipated costs for maintaining the CAT system.
The document might also prompt concerns about transparency because it does not clearly explain how the fees collected will be used. Additionally, there is no mention of what will happen after the six-month duration of the CAT Fee 2025-1, leaving the long-term strategy uncertain.
Impact on the Public
For the general public, particularly those who engage in trading activities, this fee change might seem minor given the small per-share rate. However, for frequent traders, this fee could add up. It ultimately affects how market infrastructure is funded, which can, in the long run, impact the efficiency and reliability of the national securities trading system.
Impact on Stakeholders
For industry members, which include trading firms and brokers, this change might have a more direct financial impact. The fee reduction is favorable compared to the previous year, potentially allowing these stakeholders to allocate funds elsewhere or experience marginally lower transactional costs. However, industry members might be concerned about the ambiguity surrounding how the fees are used and how budget efficiency is maintained.
Overall, while the proposed fee reduction might initially seem positive, the document leaves several open questions that could benefit from further clarification to ensure transparency and build trust among all stakeholders involved.
Financial Assessment
In the Federal Register document titled "Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Establish Fees for Industry Members Related to Reasonably Budgeted CAT Costs of the National Market System Plan Governing the Consolidated Audit Trail for 2025," several financial references and issues arise regarding the proposed fee changes for the Consolidated Audit Trail (CAT).
Summary of Financial Allocations
The document primarily discusses the introduction of a new fee, CAT Fee 2025-1, which is set at $0.000022 per executed equivalent share. This fee is intended to fund the reasonably budgeted costs of the National Market System Plan Governing the Consolidated Audit Trail for the year 2025. The CAT Fee 2025-1 is designed to be in place for six months and aims to recover approximately half of the budgeted CAT costs for the year.
This proposed fee replaces the previous CAT Fee 2024-1, which was slightly higher at $0.000035 per executed equivalent share. The change represents a reduction in the fee burden on industry members.
Relating Financial References to Identified Issues
Several issues arise from the manner these financial references are presented and explained in the document:
Lack of Justification for Fee Rate: The document sets the CAT Fee 2025-1 rate at $0.000022 per executed equivalent share but does not provide a detailed justification for this specific rate. Readers might question what "reasonably budgeted CAT costs" include and why this new rate is appropriate given these costs.
Impact of Fee Reduction: The transition from CAT Fee 2024-1 to CAT Fee 2025-1 involves a fee reduction. However, the document lacks an explanation of the impact this reduction might have on the overall budget and funding sufficiency. Understanding this would help evaluate whether the revised fee aligns well with the expected financial requirements.
Transparency of Fund Allocation: There is no clear explanation of how the collected fees will be used specifically. Providing transparency about the allocation of funds can reduce ambiguity and build trust in how the fees are contributing to CAT costs.
Duration and Long-Term Plans: The document mentions that the CAT Fee 2025-1 is anticipated to be in place for only six months, yet it does not clarify what the plans might be post this period. More information on long-term strategies would contribute to a better understanding of financial planning in relation to CAT costs.
Use of Ambiguous Terms: Terms such as "reasonably budgeted CAT costs" are vague without a detailed breakdown. A clearer definition or explanation is essential to reduce uncertainty about what costs are considered within this budget.
In conclusion, while the document provides specific financial figures regarding the CAT fees, additional clarity and justification for these numbers would enhance transparency and understanding for the audience. Addressing these issues is important for comprehensively conveying the financial aspects of the proposed rule change.
Issues
• The document does not provide a clear justification for why the new CAT Fee 2025-1 rate is set at $0.000022 per executed equivalent share and what specific cost components are covered under 'reasonably budgeted CAT costs' for 2025.
• The description of the impact of the fee reduction from CAT Fee 2024-1 ($0.000035) to CAT Fee 2025-1 ($0.000022) is missing, which could help evaluate whether the budget is adequately aligned with expected costs.
• There is no explanation regarding how the collected fees will specifically be used, which might raise concerns about the transparency of fund allocation.
• The document could be clearer on what happens after the six-month duration of the CAT Fee 2025-1. A mention of subsequent plans could provide a better understanding of the long-term fee strategy.
• The term 'reasonably budgeted CAT costs' is used without a clear definition or breakdown, which may lead to ambiguity about what costs are considered reasonable.
• The document includes complex legal and financial terminology without sufficient layman's explanations, possibly making it difficult for a general audience to fully understand the proposed changes.